Abstract For reasons that are not completely understood, remyelination is often incomplete, producing thin myelin sheaths with disorganized structure. We investigated the cellular basis for this altered myelin structure, and found that the response of oligodendrocyte progenitor cells (OPCs), and mature oligodendrocytes to TNFα and IL-1β is modified by the expression of the sphingomyelin hydrolase nSMase2. OPCs do not express nSMase2, and exhibit a protective response to these cytokines manifest by decreased ceramide, increased sphingosine 1-phosphate, and increased cell motility. Mature oligodendrocytes express nSMase2, and respond to TNFα and IL-1β with a stress phenotype, evidenced by increased ceramide, decreased sphingosine, and active caspase 3. Pharmacological inhibition or a targeted genetic deletion of nSMase2 in vivo increased myelin thickness, and enhanced myelin compaction. These results suggest that inhibition of nSMase2 improves the quality of new myelin by protecting maturing/myelinating oligodendrocytes. Pharmacological inhibition of nSMase2 following a demyelinating event could stabilize the structure of these newly formed myelin sheaths and protect them from secondary demyelination.